Psychological Pricing
Most people can willingly admit that at a point in their life, they went into a shopping mall and shopping center and spent more than they had intended to. The reason behind this can be explained through the psychological pricing strategy used in shopping stores that aimed at influencing customers to purchase more. In relation to this scenario, psychological pricing known to us as business practices that involve setting prices that are slightly lower than a whole number. The ideology behind this is that most customers will often interpret the reduced number at a lower price than the original price. Example. $3.99 is seen as lower than $4.00 because it’s interpreted as more of three than four.
Odd-even pricing is the numeric tactic used in psychological pricing to influence customers’ perceptions of the values of products. Normally this strategy involves incorporating the last numerical figures of a service or a product in the theory that different prices and or price range appear appealing to different types of buyers and customers. For example; if a product cost $100 the price is indicated as $99.95 so that it is perceived to be in the range of nineties rather than hundreds. In the eyes of the customers, the price seems to be lower than it really is. It is then concluded that the perception of using odd numbers should be put into play, mostly the businesses that want to be associated with discounts as it acts like a bargain to buyers.
Regular shoppers always have an idea or an expectation of how much a product cost based on the amount they paid for the same the last time they bought it. This concept of price expectation is known as the internal reference price. For example, I expect that I am going to part with $10 every time I go buying a burger. This means that I have formed an internal reference price over a certain period of time, which is $10. In case one day, I get into a joint and purchase the same burger at $8, I will be excited to know that I got a great deal.
Pricing lining is the procedure of the same grouping offerings under various brackets of pricing. That means that each is changing slightly as per the quality. Usually, these different brackets start from low going upwards. For example, the Pepsi drink is packaged in different sizes and sold at different prices, yet it’s the same quality. Generally, the primary goal of using a price lining strategy is sensitive to all types of customers and, as a result, an increase in sales and profit margins.
Prestige pricing is a method of maintaining a high price of products indicating their high quality and luxury. Usually, this strategy is used for luxurious products, and low pricing is associated with low-quality products. For example, All Start flights in Europe have commercial airlines that target business people and top executives offering high-quality services. These plains have a reduced number of seats, and they charge a bit higher than the other flights and go up to 200%.
Dynamic pricing is the process of customizing prices for services and goods to suit the exact customer preferences. for example, online hotel bookings for travelers—Ridesharing services like Uber, which charges different prices depending on the demand and traffic factors. Two significant factors determine the success of dynamic pricing; they are market conditions and demographics. The strategy involves rigorous tasks in customization of prices hence not widely used by most companies. This strategy is built on the factors of demand and supply, and they are mostly used in the hospitality and transportation industries. Following the above determinants, dynamic pricing is recommended for businesses that operate online